How Logbook Loans Work

When it comes to quick cash for unexpected financial emergencies, logbook loans indeed enjoy unrivaled popularity in the United Kingdom. Without any credit check needed, the financial product is not only easily accessible online but the approval rates are also quite high. In fact, your application is often good as approved provided that you’re a vehicle owner and you meet the eligibility criteria. But before you sign a contract and get tied up to a lengthy repayment terms, here’s your quick guide to how logbook loans work.

When you apply for a logbook loan, the most important requirement is your security or collateral. Logbook loans fall under the category of secured loans where your vehicle is used as collateral. That doesn’t mean your lender will keep your vehicle. The moment you get logbook loan approval, you can still keep your car but you lose ownership of your car temporarily until you clear your outstanding loan amount. Lenders will require borrowers to hand over important requirements such as your vehicle’s logbook document, MOT certificate and insurance details. You’ll also need to append your signature on a “bill of sale” document, which your lender will use to repossess your car and even sell it in case you can no longer repay for the loan.

Considering that the loan is secured against your vehicle, you can enjoy borrowing larger loan amounts, typically up to 50 or 70% of your vehicle’s official trade value. This means logbook loans are ideal for a wider array of personal needs. Whether you need £500 for rent or £10,000 for a major investment, you can count on logbook loans to meet your needs. But in exchange, you’ll have to deal with the high risks involved.

As mentioned, logbook loans are risky because they are secured loans. With your vehicle as collateral, you’ll always have to worry about the possibility of losing your vehicle. In the event of you fail to deliver your end of the deal, lenders can enforce the “bill of sale” agreement and terms, which allows them to repossess your vehicle. They can then sell said vehicle to cover for your outstanding loan balance.

Fortunately, repossession is your lender’s last resort. If you were unable to pay for a few months, your lender will give you a grace period to keep the repayments updated. After the grace period has lapsed, only then will your lender resort to vehicle repossession.